Ginnie Offers Its Help to Buffer Warehouse Pain

Joseph Murin, the president of the Government National Mortgage Association, said his agency stands ready to help ease constrictions caused by a dramatic pullback in mortgage warehouse lending, should the government pursue such an easing.

The contraction in warehouse lending is "a serious issue and I think we need to do things as quickly as possible," Murin said in an interview Thursday.

"Any nondepository mortgage banking operation is headed for extinction if we don't figure this out," he said. And disruptions not only lengthen the time it takes for consumers to get a mortgage, but they also increase borrowing costs, he said.

"Certainly Treasury understands that it's an issue," as do federal lawmakers, Murin said.

Last month the Mortgage Bankers Association asked the government for a program to guarantee warehouse loans backed by agency mortgages for up two years. The trade group said the warehousing market had collapsed from more than $200 billion in 2007 to between $20 billion and $25 billion last year.

The assistance would address "the short-term mismatch of funds to meet the recent increase in consumer demand" for mortgages, the MBA said.

Last week PNC Financial Services Group Inc. said it is shuttering the warehouse lending business it acquired when it bought National City Corp. at the end of last year.

Scott Stern, the chief executive of Lenders One in St. Louis, a cooperative of mortgage banks, said at least 10 of its members have suspended lending because they have used up the capacity in their warehouse lines.

"Companies are taking what they're calling refinance holidays," he said. "There simply will not be enough capacity to refinance people's loans."

Hank Cunningham, the president of Cunningham & Co., a mortgage bank in Greensboro, N.C., said home lenders are raising rates by 25 basis points to 37 basis points so they do not get more refi requests than they can fund.

"If all of a sudden mortgage bankers could not access lines of credit, a lot of small businesses would go under and more capacity would disappear for the consumer," Cunningham said.

MBA President John Courson said the Treasury Department could create a program under which Ginnie would "early-fund" mortgages insured by the Federal Housing Administration and other government agencies.

Murin said Ginnie could not enter the warehouse business without a change to its charter, "but we certainly could help administer a program. We're looking at: What are the options? How could this be done? Could it be done outside of Tarp?" — the Troubled Asset Relief Program.

The idea is that Ginnie would take possession of loans three days after closing, instead of the 15 to 45 days it typically takes to put the mortgages in securitization pools.

"We're just looking to increase the velocity of the current" warehouse loan "dollars that are in use as a stop-gap measure," Murin said. "If we can buy 12, 18, 24 months through this very simplified process, then it gives the industry time to figure out what they can do to bring private money into the warehouse game or whatever it might be."

Courson said another avenue might involve Fannie Mae and Freddie Mac, through their regulator, the Federal Housing Finance Agency, purchasing participation interests in warehouse loans, freeing up resources for lenders to make new loans.

National Mortgage News reported last week that some in the mortgage industry were pushing for a role for Ginnie in warehousing.